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Www Irs Gov 1040x

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Www irs gov 1040x Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Www irs gov 1040x Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Www irs gov 1040x An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. Www irs gov 1040x In general, an executor and an administrator perform the same duties and have the same responsibilities. Www irs gov 1040x For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. Www irs gov 1040x It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. Www irs gov 1040x Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. Www irs gov 1040x The personal representative also must perform the following duties. Www irs gov 1040x Apply for an employer identification number (EIN) for the estate. Www irs gov 1040x File all tax returns, including income, estate and gift tax returns, when due. Www irs gov 1040x Pay the tax determined up to the date of discharge from duties. Www irs gov 1040x Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Www irs gov 1040x If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. Www irs gov 1040x Penalty. Www irs gov 1040x   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Www irs gov 1040x Reliance on an agent (attorney, accountant, etc. Www irs gov 1040x ) is not reasonable cause for late filing. Www irs gov 1040x It is the personal representative's duty to file the returns for the decedent and the estate when due. Www irs gov 1040x Identification number. Www irs gov 1040x   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Www irs gov 1040x You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. Www irs gov 1040x You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Www irs gov 1040x   You can get an EIN by applying online at www. Www irs gov 1040x irs. Www irs gov 1040x gov (click on "Apply for an EIN Online" under the Tools heading). Www irs gov 1040x Generally, if you apply online, you will receive your EIN immediately upon completing the application. Www irs gov 1040x You can also apply using Form SS-4, Application for Employer Identification Number. Www irs gov 1040x Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Www irs gov 1040x See the form instructions for other ways to apply. Www irs gov 1040x   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Www irs gov 1040x After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Www irs gov 1040x As the personal representative handling the estate, you must furnish this identification number to the payer. Www irs gov 1040x For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. Www irs gov 1040x If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. Www irs gov 1040x   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). Www irs gov 1040x Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. Www irs gov 1040x    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Www irs gov 1040x Also do not use it to make estimated tax payments for a tax year after the year of death. Www irs gov 1040x Penalty. Www irs gov 1040x   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. Www irs gov 1040x You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. Www irs gov 1040x Notice of fiduciary relationship. Www irs gov 1040x   The term fiduciary means any person acting for another person. Www irs gov 1040x It applies to persons who have positions of trust on behalf of others. Www irs gov 1040x A personal representative for a decedent's estate is a fiduciary. Www irs gov 1040x Form 56. Www irs gov 1040x   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Www irs gov 1040x Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Www irs gov 1040x See the Instructions for Form 56 for filing requirements and other information. Www irs gov 1040x   File Form 56 as soon as all the necessary information (including the EIN) is available. Www irs gov 1040x It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Www irs gov 1040x The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Www irs gov 1040x Termination of fiduciary relationship. Www irs gov 1040x   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. Www irs gov 1040x See Form 56 and its instructions for more information. Www irs gov 1040x   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. Www irs gov 1040x See below for a discussion of these forms. Www irs gov 1040x Request for prompt assessment (charge) of tax. Www irs gov 1040x   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. Www irs gov 1040x However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Www irs gov 1040x This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Www irs gov 1040x This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Www irs gov 1040x This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Www irs gov 1040x Form 4810. Www irs gov 1040x   Form 4810 can be used for making this request. Www irs gov 1040x It must be filed separately from any other document. Www irs gov 1040x   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Www irs gov 1040x You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. Www irs gov 1040x This applies even though the returns were filed before the decedent's death. Www irs gov 1040x Failure to report income. Www irs gov 1040x   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. Www irs gov 1040x However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Www irs gov 1040x Request for discharge from personal liability for tax. Www irs gov 1040x   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Www irs gov 1040x The request must be made after the returns for those taxes are filed. Www irs gov 1040x To make the request, file Form 5495. Www irs gov 1040x For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Www irs gov 1040x   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Www irs gov 1040x If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Www irs gov 1040x If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. Www irs gov 1040x    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. Www irs gov 1040x Insolvent estate. Www irs gov 1040x   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. Www irs gov 1040x Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. Www irs gov 1040x The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. Www irs gov 1040x The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. Www irs gov 1040x Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. Www irs gov 1040x Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Www irs gov 1040x If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. Www irs gov 1040x If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. Www irs gov 1040x If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. Www irs gov 1040x Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. Www irs gov 1040x A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Www irs gov 1040x See Joint Return, later. Www irs gov 1040x Return for preceding year. Www irs gov 1040x   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. Www irs gov 1040x The return for that year will be a regular return and the personal representative must file it. Www irs gov 1040x Example. Www irs gov 1040x Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Www irs gov 1040x Her personal representative must file her 2012 return by April 15, 2013. Www irs gov 1040x Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Www irs gov 1040x Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Www irs gov 1040x If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Www irs gov 1040x If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. Www irs gov 1040x Third party designee. Www irs gov 1040x   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. Www irs gov 1040x This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. Www irs gov 1040x It also allows the designee to perform certain actions. Www irs gov 1040x See the Instructions for Form 1040 for details. Www irs gov 1040x Signature. Www irs gov 1040x   If a personal representative has been appointed, that person must sign the return. Www irs gov 1040x If it is a joint return, the surviving spouse must also sign it. Www irs gov 1040x If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. Www irs gov 1040x ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Www irs gov 1040x ” Paid preparer. Www irs gov 1040x   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. Www irs gov 1040x See the Form 1040 instructions for details. Www irs gov 1040x When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. Www irs gov 1040x A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. Www irs gov 1040x However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. Www irs gov 1040x The tax return must be prepared for the year of death regardless of when during the year death occurred. Www irs gov 1040x Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Www irs gov 1040x A tax return for a decedent can be electronically filed. Www irs gov 1040x A personal representative may also obtain an income tax filing extension on behalf of a decedent. Www irs gov 1040x Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Www irs gov 1040x Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. Www irs gov 1040x It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Www irs gov 1040x In general, filing status depends on whether the decedent was considered single or married at the time of death. Www irs gov 1040x See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Www irs gov 1040x Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. Www irs gov 1040x Also, the decedent may be entitled to other credits that result in a refund. Www irs gov 1040x These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Www irs gov 1040x Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Www irs gov 1040x   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. Www irs gov 1040x   If the personal representative is filing a claim for refund on Form 1040X, Amended U. Www irs gov 1040x S. Www irs gov 1040x Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. Www irs gov 1040x Example. Www irs gov 1040x Edward Green died before filing his tax return. Www irs gov 1040x You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Www irs gov 1040x You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. Www irs gov 1040x    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Www irs gov 1040x Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. Www irs gov 1040x A new check will be issued in your name and mailed to you. Www irs gov 1040x Death certificate. Www irs gov 1040x   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Www irs gov 1040x Instead, keep it for your records and provide it if requested. Www irs gov 1040x Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Www irs gov 1040x S. Www irs gov 1040x Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Www irs gov 1040x See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Www irs gov 1040x Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Www irs gov 1040x However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. Www irs gov 1040x This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. Www irs gov 1040x The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. Www irs gov 1040x A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. Www irs gov 1040x The filing status of the decedent in this instance is married filing a separate return. Www irs gov 1040x For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Www irs gov 1040x Personal representative may revoke joint return election. Www irs gov 1040x   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Www irs gov 1040x This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Www irs gov 1040x The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. Www irs gov 1040x Relief from joint liability. Www irs gov 1040x   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Www irs gov 1040x If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. Www irs gov 1040x For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Www irs gov 1040x Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. Www irs gov 1040x The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Www irs gov 1040x This section explains how some types of income are reported on the final return. Www irs gov 1040x For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Www irs gov 1040x Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. Www irs gov 1040x Constructive receipt of income. Www irs gov 1040x   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Www irs gov 1040x Include the interest income on the final return. Www irs gov 1040x   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Www irs gov 1040x If the corporation customarily mailed its dividend checks, the dividend was includible when received. Www irs gov 1040x If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Www irs gov 1040x Do not include the dividend in the final return. Www irs gov 1040x Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Www irs gov 1040x If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Www irs gov 1040x Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. Www irs gov 1040x A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. Www irs gov 1040x You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Www irs gov 1040x For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). Www irs gov 1040x For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. Www irs gov 1040x If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. Www irs gov 1040x See U. Www irs gov 1040x S. Www irs gov 1040x savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. Www irs gov 1040x How to report. Www irs gov 1040x   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Www irs gov 1040x Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Www irs gov 1040x Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Www irs gov 1040x Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Www irs gov 1040x   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Www irs gov 1040x    Note. Www irs gov 1040x If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. Www irs gov 1040x See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Www irs gov 1040x Partnership Income The death of a partner closes the partnership's tax year for that partner. Www irs gov 1040x Generally, it does not close the partnership's tax year for the remaining partners. Www irs gov 1040x The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. Www irs gov 1040x To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. Www irs gov 1040x On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Www irs gov 1040x The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Www irs gov 1040x The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Www irs gov 1040x Example. Www irs gov 1040x Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Www irs gov 1040x The partnership uses a tax year ending June 30. Www irs gov 1040x Mary died August 31, 2013, and her estate established its tax year through August 31. Www irs gov 1040x The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Www irs gov 1040x Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). Www irs gov 1040x Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. Www irs gov 1040x S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. Www irs gov 1040x The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Www irs gov 1040x The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Www irs gov 1040x Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Www irs gov 1040x For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. Www irs gov 1040x For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Www irs gov 1040x Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. Www irs gov 1040x For more information, see Publication 555, Community Property. Www irs gov 1040x HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. Www irs gov 1040x If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. Www irs gov 1040x The estate tax deduction, discussed later, does not apply to this amount. Www irs gov 1040x If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Www irs gov 1040x For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Www irs gov 1040x Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. Www irs gov 1040x The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Www irs gov 1040x If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. Www irs gov 1040x The estate tax deduction, discussed later, does not apply to this amount. Www irs gov 1040x If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Www irs gov 1040x The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. Www irs gov 1040x This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. Www irs gov 1040x For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Www irs gov 1040x Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Www irs gov 1040x These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Www irs gov 1040x Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. Www irs gov 1040x For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Www irs gov 1040x Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Www irs gov 1040x Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Www irs gov 1040x This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Www irs gov 1040x See Medical Expenses, later. Www irs gov 1040x Exemptions You can claim the decedent's personal exemption on the final income tax return. Www irs gov 1040x If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. Www irs gov 1040x Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. Www irs gov 1040x For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Www irs gov 1040x Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. Www irs gov 1040x This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Www irs gov 1040x Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. Www irs gov 1040x In that case medical expenses exceeding 7. Www irs gov 1040x 5% of AGI may be deducted. Www irs gov 1040x Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Www irs gov 1040x Election for decedent's expenses. Www irs gov 1040x   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Www irs gov 1040x However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. Www irs gov 1040x   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). Www irs gov 1040x You can deduct expenses incurred in the year of death on the final income tax return. Www irs gov 1040x You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. Www irs gov 1040x   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Www irs gov 1040x 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Www irs gov 1040x Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Www irs gov 1040x Making the election. Www irs gov 1040x   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Www irs gov 1040x The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. Www irs gov 1040x This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Www irs gov 1040x Example. Www irs gov 1040x Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Www irs gov 1040x Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Www irs gov 1040x Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Www irs gov 1040x Richard itemized his deductions when he filed his 2012 income tax return. Www irs gov 1040x The personal representative of the estate paid the entire $800 liability in August 2013. Www irs gov 1040x The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Www irs gov 1040x 5% limit. Www irs gov 1040x The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Www irs gov 1040x 5% limit. Www irs gov 1040x The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. Www irs gov 1040x Medical expenses not paid by estate. Www irs gov 1040x   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. Www irs gov 1040x If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. Www irs gov 1040x Insurance reimbursements. Www irs gov 1040x   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. Www irs gov 1040x The reimbursements are also includible in the decedent's gross estate. Www irs gov 1040x No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Www irs gov 1040x These expenses may be deductible for estate tax purposes on Form 706. Www irs gov 1040x Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. Www irs gov 1040x A net operating loss on the decedent's final income tax return can be carried back to prior years. Www irs gov 1040x (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Www irs gov 1040x ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Www irs gov 1040x At-risk loss limits. Www irs gov 1040x   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Www irs gov 1040x   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Www irs gov 1040x An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. Www irs gov 1040x An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. Www irs gov 1040x The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. Www irs gov 1040x For more information, see Publication 925, Passive Activity and At-Risk Rules. Www irs gov 1040x Passive activity rules. Www irs gov 1040x   A passive activity is any trade or business activity in which the taxpayer does not materially participate. Www irs gov 1040x To determine material participation, see Publication 925. Www irs gov 1040x Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Www irs gov 1040x   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Www irs gov 1040x Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Www irs gov 1040x   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Www irs gov 1040x Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. Www irs gov 1040x The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Www irs gov 1040x   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Www irs gov 1040x For more information, see Publication 925. Www irs gov 1040x Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. Www irs gov 1040x Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Www irs gov 1040x Some of these credits are discussed next. Www irs gov 1040x Earned income credit. Www irs gov 1040x   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. Www irs gov 1040x If the allowable credit is more than the tax liability for the year, the excess is refunded. Www irs gov 1040x   For more information, see Publication 596, Earned Income Credit (EIC). Www irs gov 1040x Credit for the elderly or the disabled. Www irs gov 1040x   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. Www irs gov 1040x The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Www irs gov 1040x   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Www irs gov 1040x Child tax credit. Www irs gov 1040x   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. Www irs gov 1040x You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. Www irs gov 1040x For more information, see the Instructions for Form 1040. Www irs gov 1040x Adoption credit. Www irs gov 1040x   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. Www irs gov 1040x   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. Www irs gov 1040x See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Www irs gov 1040x General business tax credit. Www irs gov 1040x   The general business credit available to a taxpayer is limited. Www irs gov 1040x Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Www irs gov 1040x Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Www irs gov 1040x   After the carryforward period, a deduction may be allowed for any unused business credit. Www irs gov 1040x If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Www irs gov 1040x   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Www irs gov 1040x Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. Www irs gov 1040x Self-employment tax. Www irs gov 1040x   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. Www irs gov 1040x 28 or more. Www irs gov 1040x Alternative minimum tax (AMT). Www irs gov 1040x   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Www irs gov 1040x The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Www irs gov 1040x In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Www irs gov 1040x Form 6251. Www irs gov 1040x    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Www irs gov 1040x See the form instructions for information on when you must attach Form 6251 to Form 1040. Www irs gov 1040x Form 8801. Www irs gov 1040x   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Www irs gov 1040x See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Www irs gov 1040x Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. Www irs gov 1040x Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. Www irs gov 1040x Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. Www irs gov 1040x For this purpose, a qualified hazardous duty area is treated as a combat zone. Www irs gov 1040x If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Www irs gov 1040x If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Www irs gov 1040x Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. Www irs gov 1040x If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Www irs gov 1040x Also, if any tax was collected after the date of death, that amount will be credited or refunded. Www irs gov 1040x The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. Www irs gov 1040x This is true even if death actually occurred earlier. Www irs gov 1040x For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Www irs gov 1040x Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. Www irs gov 1040x S. Www irs gov 1040x employee, and In a military or terrorist action. Www irs gov 1040x The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. Www irs gov 1040x Example. Www irs gov 1040x The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Www irs gov 1040x S. Www irs gov 1040x employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. Www irs gov 1040x Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Www irs gov 1040x Military or terrorist action defined. Www irs gov 1040x   A military or terrorist action means the following. Www irs gov 1040x Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Www irs gov 1040x Any military action involving the U. Www irs gov 1040x S. Www irs gov 1040x Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. Www irs gov 1040x   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Www irs gov 1040x Military action does not include training exercises. Www irs gov 1040x Any multinational force in which the United States is participating is treated as an ally of the United States. Www irs gov 1040x Determining if a terrorist activity or military action has occurred. Www irs gov 1040x   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Www irs gov 1040x Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Www irs gov 1040x Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Www irs gov 1040x The April 19, 1995, terrorist attack on the Alfred P. Www irs gov 1040x Murrah Federal Building (Oklahoma City). Www irs gov 1040x The September 11, 2001, terrorist attacks. Www irs gov 1040x The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Www irs gov 1040x The Act also exempts from federal income tax the following types of income. Www irs gov 1040x Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Www irs gov 1040x Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Www irs gov 1040x Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Www irs gov 1040x Payments from the September 11th Victim Compensation Fund 2001. Www irs gov 1040x The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Www irs gov 1040x See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Www irs gov 1040x Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. Www irs gov 1040x The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Www irs gov 1040x For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Www irs gov 1040x However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). Www irs gov 1040x For more information on the Act, see Publication 3920. Www irs gov 1040x Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. Www irs gov 1040x If any tax is still due, it will be canceled. Www irs gov 1040x The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. Www irs gov 1040x If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. Www irs gov 1040x Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Www irs gov 1040x This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. Www irs gov 1040x Filing a claim. Www irs gov 1040x   Use the following procedures to file a claim. Www irs gov 1040x If a U. Www irs gov 1040x S. Www irs gov 1040x individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Www irs gov 1040x Form W-2, Wage and Tax Statement, must accompany all returns. Www irs gov 1040x If a U. Www irs gov 1040x S. Www irs gov 1040x individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Www irs gov 1040x You must file a separate Form 1040X for each year in question. Www irs gov 1040x   You must file these returns and claims at the following address for regular mail (U. Www irs gov 1040x S. Www irs gov 1040x Postal Service). Www irs gov 1040x    Internal Revenue Service 333 W. Www irs gov 1040x Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. Www irs gov 1040x On the applicable return, write the same phrase on the line for total tax. Www irs gov 1040x If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. Www irs gov 1040x   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Www irs gov 1040x On joint returns, make an allocation of the tax as described below under Joint returns. Www irs gov 1040x If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. Www irs gov 1040x   You must attach Form 1310 to all returns and claims for refund. Www irs gov 1040x However, for exceptions to filing Form 1310, see Form 1310. Www irs gov 1040x Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Www irs gov 1040x   You must also attach proof of death that includes a statement that the individual was a U. Www irs gov 1040x S. Www irs gov 1040x employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Www irs gov 1040x For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Www irs gov 1040x For other U. Www irs gov 1040x S. Www irs gov 1040x civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Www irs gov 1040x For other U. Www irs gov 1040x S. Www irs gov 1040x civilian employees killed overseas, attach a certification from the Department of State. Www irs gov 1040x   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Www irs gov 1040x Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. Www irs gov 1040x Joint returns. Www irs gov 1040x   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Www irs gov 1040x Determine the decedent's tax liability as follows. Www irs gov 1040x Figure the income tax for which the decedent would have been liable if a separate return had been filed. Www irs gov 1040x Figure the income tax for which the spouse would have been liable if a separate return had been filed. Www irs gov 1040x Multiply the joint tax liability by a fraction. Www irs gov 1040x The numerator of the fraction is the amount in (1), above. Www irs gov 1040x The denominator of the fraction is the total of (1) and (2). Www irs gov 1040x   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Www irs gov 1040x Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Www irs gov 1040x Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Www irs gov 1040x If a personal representative has been appointed, the personal representative must sign the return. Www irs gov 1040x If it is a joint return, the surviving spouse must also sign it. Www irs gov 1040x If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. Www irs gov 1040x If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Www irs gov 1040x ” To claim a refund for the decedent, do the following. Www irs gov 1040x If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Www irs gov 1040x If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. Www irs gov 1040x (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Www irs gov 1040x ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). Www irs gov 1040x If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. Www irs gov 1040x Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. Www irs gov 1040x Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Www irs gov 1040x Joint return by surviving spouse. Www irs gov 1040x   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. Www irs gov 1040x Decedent as your dependent. Www irs gov 1040x   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. Www irs gov 1040x   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Www irs gov 1040x To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. Www irs gov 1040x To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. Www irs gov 1040x Qualifying widows and widowers. Www irs gov 1040x   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. Www irs gov 1040x Requirements. Www irs gov 1040x   Generally, you qualify for this special benefit if you meet all of the following requirements. Www irs gov 1040x You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Www irs gov 1040x You did not remarry before the end of the current tax year. Www irs gov 1040x You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Www irs gov 1040x You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. Www irs gov 1040x Example. Www irs gov 1040x William Burns' wife died in 2010. Www irs gov 1040x William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Www irs gov 1040x For 2010, he was entitled to file a joint return for himself and his deceased wife. Www irs gov 1040x For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Www irs gov 1040x For later years, he may qualify to file as a head of household. Www irs gov 1040x Figuring your tax. Www irs gov 1040x   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Www irs gov 1040x Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Www irs gov 1040x   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Www irs gov 1040x Joint return filing rules. Www irs gov 1040x   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. Www irs gov 1040x See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Www irs gov 1040x Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. Www irs gov 1040x If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. Www irs gov 1040x This exclusion does not apply to certain income. Www irs gov 1040x For more information, see Publication 3920. Www irs gov 1040x How To Report Income in respect of a decedent must be included in the income of one of the following. Www irs gov 1040x The decedent's estate, if the estate receives it. Www irs gov 1040x The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Www irs gov 1040x Any person to whom the estate properly distributes the right to receive it. Www irs gov 1040x If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. Www irs gov 1040x See Estate Tax Deduction, later. Www irs gov 1040x Example 1. Www irs gov 1040x Frank Johnson owned and operated an apple orchard. Www irs gov 1040x He used the cash method of accounting. Www irs gov 1040x He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Www irs gov 1040x The proceeds from the sale are income in respect of a decedent. Www irs gov 1040x When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Www irs gov 1040x When Frank's widow collects the $2,000, she must include that amount in her return. Www irs gov 1040x It is not reported on the final return of the decedent or on the return of the estate. Www irs gov 1040x Example 2. Www irs gov 1040x Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Www irs gov 1040x The amount accrued from the sale of the apples would be included on his final return. Www irs gov 1040x Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Www irs gov 1040x Example 3. Www irs gov 1040x On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Www irs gov 1040x His adjusted basis in the tractor was $2,000. Www irs gov 1040x George died on February 15, before receiving payment. Www irs gov 1040x The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. Www irs gov 1040x In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Www irs gov 1040x Example 4. Www irs gov 1040x Cathy O'Neil was entitled to a large salary payment at the date of her death. Www irs gov 1040x The amount was to be paid in five annual installments. Www irs gov 1040x The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Www irs gov 1040x The payments are income in respect of a decedent. Www irs gov 1040x None of the payments were includible on Cathy's final return. Www irs gov 1040x The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. Www irs gov 1040x Example 5. Www irs gov 1040x You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Www irs gov 1040x You inherited the right from your mother, who acquired it by bequest from your father. Www irs gov 1040x Your mother died before she received all the commissions she had the right to receive, so you received the rest. Www irs gov 1040x The commissions are income in respect of a decedent. Www irs gov 1040x None of these commissions were includible in your father's final return. Www irs gov 1040x The commissions received by your mother were included in her income. Www irs gov 1040x The commissions you received are not includible in your mother's income, even on her final return. Www irs gov 1040x You must include them in your income. Www irs gov 1040x Character of income. Www irs gov 1040x   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. Www irs gov 1040x If the income would have been a capital gain to the decedent, it will be a capital gain to you. Www irs gov 1040x Transfer of right to income. Www irs gov 1040x   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. Www irs gov 1040x   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. Www irs gov 1040x   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. Www irs gov 1040x See Installment obligations, later. Www irs gov 1040x Transfer defined. Www irs gov 1040x   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. Www irs gov 1040x Installment obligations. Www irs gov 1040x   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. Www irs gov 1040x Include in your income the same profit the decedent would have included had death not occurred. Www irs gov 1040x For more information, see Publication 537, Installment Sales. Www irs gov 1040x   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. Www irs gov 1040x Transfer to obligor. Www irs gov 1040x   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). Www irs gov 1040x A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Www irs gov 1040x An obligation that becomes unenforceable is treated as having been canceled. Www irs gov 1040x   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. Www irs gov 1040x The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. Www irs gov 1040x   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Www irs gov 1040x Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. Www irs gov 1040x Wages. Www irs gov 1040x   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. Www irs gov 1040x The income is not reduced by any amounts withheld by the employer. Www irs gov 1040x If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. Www irs gov 1040x   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Www irs gov 1040x However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Www irs gov 1040x These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Www irs gov 1040x These wages are not included in box 1 of Form W-2. Www irs gov 1040x   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe
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Projections of Federal Tax Return Filings - IRS Office of Research

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Here you will find forecasts of the number of returns to be filed for tax forms within the individual, tax-exempt, and business areas. These statistical projections are developed by the IRS Office of Research.

Projections Publications

The following publications are available as an Adobe Acrobat PDF file. A free Adobe® reader is available for download, if needed. Also, the following tables are available as Microsoft Excel spreadsheets. A free Excel® reader is available for download, if needed.

Calendar Year Projections of Information and Withholding Documents for the United States and IRS Campuses (PDF)
Publication 6961 (Revised 12/12) by IRS; Research, Analysis, and Statistics; Office of Research
This IRS Publication contains multi-year projections of the number of information and withholding documents to be filed with the IRS. The publication includes detailed projections by approximately 30 information document types such as Form W-2, Form 1099INT, etc., by medium of filing (paper versus electronic) and by IRS processing campus location.
Fiscal Year Return Projections for the United States (PDF)
Publication 6292 (Revised 07/12) by IRS; Research, Analysis, and Statistics; Office of Research
IRS Publication 6292 contains multi-year projections of the number of tax returns to be filed with the IRS by fiscal year of filing. The publication includes detailed projections by approximately 50 different individual, business and tax-exempt return types such as Form 1040, Form 1120, Form 941 and Form 990. There is also additional detail by medium of filing (paper versus electronic) and by IRS business operating division categorizations.
Calendar Year Projections of Individual Returns by Major Processing Categories, Selected Years and Areas (PDF)
Publication 6187 (Revised 11/12) by IRS; Research, Analysis, and Statistics; Office of Research
IRS Publication 6187 contains multi-year projections of the number of individual Form 1040 series returns to be filed with the IRS by major processing categories important to IRS planning operations. This includes detail by form type (Forms 1040, 1040A, and 1040EZ), by medium of filing (paper versus electronic), and by other characteristics such as refund returns. Selected portions of the forecasts are also shown by IRS processing campus location, and by state.
Calendar Year Return Projections for the United States and IRS Campuses (PDF)
Publication 6186 (Revised 10/13) by IRS; Research, Analysis, and Statistics; Office of Research
IRS Publication 6186 contains multi-year projections of the number of tax returns to be filed with the IRS by the calendar year of filing. The publication includes detailed projections by approximately 50 different individual, business and tax-exempt return types such as Form 1040, Form 1120, Form 941 and Form 990. There is also additional detail by medium of filing (paper versus electronic) and by IRS processing campus location.
Calendar Year Return Projections by State (PDF)
Publication 6149 (Revised 12/12) by IRS; Research, Analysis, and Statistics; Office of Research.
IRS Publication 6149 contains multi-year projections of the number of tax returns to be filed with the IRS by state—as determined by the addresses on the tax returns. The publication includes detailed projections by approximately 50 different individual, business and tax-exempt return types such as Form 1040, Form 1120, Form 941 and Form 990. There is also additional detail by medium of filing (paper versus electronic).

Articles

Projections of Federal Tax Return Filings: Calendar Years 2009–2016
Winter Bulletin, 2010

A grand total of 238 million tax returns are projected to be filed with the IRS during Calendar Year (CY) 2010. This number represents a decrease of 1 percent from the estimated CY 2009 filings of 240.4 million returns.

Related
Statistical Table: 1
Projections of Federal Tax Return Filings: Calendar Years 2005–2012
SOI Bulletin, Winter 2005–2006
Taxpayers are expected to file a grand total of 229.3 million tax returns with the Internal Revenue Service (IRS) during Calendar Year (CY) 2006. That projected level reflects a modest increase of only 0.1 percent over the estimated CY 2005 filings of 229.0 million. Related
Statistical Table: 1

Historical Projections Table


Data Presented

Selected Returns and Forms Filed or To Be Filed by Type During Specified Calendar Years
Tax Years
1990–2007
Published as:
SOI Bulletin, Historical Table 22

 

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Page Last Reviewed or Updated: 15-Nov-2013

The Www Irs Gov 1040x

Www irs gov 1040x 8. Www irs gov 1040x   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Www irs gov 1040x Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Www irs gov 1040x It is similar to the straight line method of depreciation. Www irs gov 1040x The various amortizable costs covered in this chapter are included in the list below. Www irs gov 1040x However, this chapter does not discuss amortization of bond premium. Www irs gov 1040x For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Www irs gov 1040x Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Www irs gov 1040x How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Www irs gov 1040x To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Www irs gov 1040x For example, in 2012, you began to amortize a lease. Www irs gov 1040x In 2013, you began to amortize a second lease. Www irs gov 1040x Report amortization from the new lease on line 42 of your 2013 Form 4562. Www irs gov 1040x Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Www irs gov 1040x If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Www irs gov 1040x Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Www irs gov 1040x Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Www irs gov 1040x Generally, you recover costs for particular assets through depreciation deductions. Www irs gov 1040x However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Www irs gov 1040x For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Www irs gov 1040x For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Www irs gov 1040x The costs that are not deducted currently can be amortized ratably over a 180-month period. Www irs gov 1040x The amortization period starts with the month you begin operating your active trade or business. Www irs gov 1040x You are not required to attach a statement to make this election. Www irs gov 1040x You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Www irs gov 1040x Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Www irs gov 1040x See Regulations sections 1. Www irs gov 1040x 195-1, 1. Www irs gov 1040x 248-1, and 1. Www irs gov 1040x 709-1. Www irs gov 1040x For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Www irs gov 1040x Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Www irs gov 1040x If the election is made, you must attach any statement required by Regulations sections 1. Www irs gov 1040x 195-1(b), 1. Www irs gov 1040x 248-1(c), and 1. Www irs gov 1040x 709-1(c), as in effect before September 9, 2008. Www irs gov 1040x Note. Www irs gov 1040x You can apply the provisions of Regulations sections 1. Www irs gov 1040x 195-1, 1. Www irs gov 1040x 248-1, and 1. Www irs gov 1040x 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Www irs gov 1040x Otherwise, the provisions under Regulations sections 1. Www irs gov 1040x 195-1(b), 1. Www irs gov 1040x 248-1(c), and 1. Www irs gov 1040x 709-1(c), as in effect before September 9, 2008, will apply. Www irs gov 1040x For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Www irs gov 1040x See How To Make the Election , later. Www irs gov 1040x The cost must qualify as one of the following. Www irs gov 1040x A business start-up cost. Www irs gov 1040x An organizational cost for a corporation. Www irs gov 1040x An organizational cost for a partnership. Www irs gov 1040x Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Www irs gov 1040x Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Www irs gov 1040x Qualifying costs. Www irs gov 1040x   A start-up cost is amortizable if it meets both of the following tests. Www irs gov 1040x It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Www irs gov 1040x It is a cost you pay or incur before the day your active trade or business begins. Www irs gov 1040x   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Www irs gov 1040x Advertisements for the opening of the business. Www irs gov 1040x Salaries and wages for employees who are being trained and their instructors. Www irs gov 1040x Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Www irs gov 1040x Salaries and fees for executives and consultants, or for similar professional services. Www irs gov 1040x Nonqualifying costs. Www irs gov 1040x   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Www irs gov 1040x See Research and Experimental Costs , later. Www irs gov 1040x Purchasing an active trade or business. Www irs gov 1040x   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Www irs gov 1040x These are costs that help you decide whether to purchase a business. Www irs gov 1040x Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Www irs gov 1040x Example. Www irs gov 1040x On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Www irs gov 1040x They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Www irs gov 1040x In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Www irs gov 1040x The letter stated that a binding commitment would result only after a purchase agreement was signed. Www irs gov 1040x The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Www irs gov 1040x On October 22nd, you signed a purchase agreement with XYZ, Inc. Www irs gov 1040x All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Www irs gov 1040x Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Www irs gov 1040x Disposition of business. Www irs gov 1040x   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Www irs gov 1040x However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Www irs gov 1040x Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Www irs gov 1040x Qualifying costs. Www irs gov 1040x   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Www irs gov 1040x   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Www irs gov 1040x   Examples of organizational costs include: The cost of temporary directors. Www irs gov 1040x The cost of organizational meetings. Www irs gov 1040x State incorporation fees. Www irs gov 1040x The cost of legal services. Www irs gov 1040x Nonqualifying costs. Www irs gov 1040x   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Www irs gov 1040x Costs associated with the transfer of assets to the corporation. Www irs gov 1040x Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Www irs gov 1040x Qualifying costs. Www irs gov 1040x   A partnership can amortize an organizational cost only if it meets all the following tests. Www irs gov 1040x It is for the creation of the partnership and not for starting or operating the partnership trade or business. Www irs gov 1040x It is chargeable to a capital account (see chapter 1). Www irs gov 1040x It could be amortized over the life of the partnership if the partnership had a fixed life. Www irs gov 1040x It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Www irs gov 1040x However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Www irs gov 1040x It is for a type of item normally expected to benefit the partnership throughout its entire life. Www irs gov 1040x   Organizational costs include the following fees. Www irs gov 1040x Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Www irs gov 1040x Accounting fees for services incident to the organization of the partnership. Www irs gov 1040x Filing fees. Www irs gov 1040x Nonqualifying costs. Www irs gov 1040x   The following costs cannot be amortized. Www irs gov 1040x The cost of acquiring assets for the partnership or transferring assets to the partnership. Www irs gov 1040x The cost of admitting or removing partners, other than at the time the partnership is first organized. Www irs gov 1040x The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Www irs gov 1040x The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Www irs gov 1040x These “syndication fees” are capital expenses that cannot be depreciated or amortized. Www irs gov 1040x Liquidation of partnership. Www irs gov 1040x   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Www irs gov 1040x However, these costs can be deducted only to the extent they qualify as a loss from a business. Www irs gov 1040x How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Www irs gov 1040x You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Www irs gov 1040x Once you choose an amortization period, you cannot change it. Www irs gov 1040x To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Www irs gov 1040x The result is the amount you can deduct for each month. Www irs gov 1040x Cash method partnership. Www irs gov 1040x   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Www irs gov 1040x However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Www irs gov 1040x How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Www irs gov 1040x You may also be required to attach an accompanying statement (described later) to your return. Www irs gov 1040x For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Www irs gov 1040x Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Www irs gov 1040x 195-1, 1. Www irs gov 1040x 248-1, and 1. Www irs gov 1040x 709-1, you must also attach an accompanying statement to elect to amortize the costs. Www irs gov 1040x If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Www irs gov 1040x See Starting a Business , earlier, for more information. Www irs gov 1040x Generally, you must file the return by the due date (including any extensions). Www irs gov 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www irs gov 1040x For more information, see the instructions for Part VI of Form 4562. Www irs gov 1040x You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Www irs gov 1040x Note. Www irs gov 1040x The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Www irs gov 1040x If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Www irs gov 1040x A shareholder or partner cannot make this election. Www irs gov 1040x You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Www irs gov 1040x Only the corporation or partnership can amortize these costs. Www irs gov 1040x However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Www irs gov 1040x These costs qualify as business start-up costs if you acquire the partnership interest. Www irs gov 1040x Start-up costs election statement. Www irs gov 1040x   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Www irs gov 1040x A description of the business to which the start-up costs relate. Www irs gov 1040x A description of each start-up cost incurred. Www irs gov 1040x The month your active business began (or was acquired). Www irs gov 1040x The number of months in your amortization period (which is generally 180 months). Www irs gov 1040x Filing the statement early. Www irs gov 1040x   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Www irs gov 1040x If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Www irs gov 1040x Revised statement. Www irs gov 1040x   You can file a revised statement to include any start-up costs not included in your original statement. Www irs gov 1040x However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Www irs gov 1040x You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Www irs gov 1040x Organizational costs election statement. Www irs gov 1040x   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Www irs gov 1040x A description of each cost. Www irs gov 1040x The amount of each cost. Www irs gov 1040x The date each cost was incurred. Www irs gov 1040x The month your corporation or partnership began active business (or acquired the business). Www irs gov 1040x The number of months in your amortization period (which is generally 180 months). Www irs gov 1040x Partnerships. Www irs gov 1040x   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Www irs gov 1040x   You do not need to separately list any partnership organizational cost that is less than $10. Www irs gov 1040x Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Www irs gov 1040x   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Www irs gov 1040x Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Www irs gov 1040x The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Www irs gov 1040x However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Www irs gov 1040x For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Www irs gov 1040x How to amortize. Www irs gov 1040x   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Www irs gov 1040x Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Www irs gov 1040x You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Www irs gov 1040x You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Www irs gov 1040x See Anti-Churning Rules, later. Www irs gov 1040x Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Www irs gov 1040x The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Www irs gov 1040x You cannot deduct amortization for the month you dispose of the intangible. Www irs gov 1040x If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Www irs gov 1040x You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Www irs gov 1040x Tax-exempt use property subject to a lease. Www irs gov 1040x   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Www irs gov 1040x Cost attributable to other property. Www irs gov 1040x   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Www irs gov 1040x For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Www irs gov 1040x Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Www irs gov 1040x Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Www irs gov 1040x You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Www irs gov 1040x Goodwill. Www irs gov 1040x   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Www irs gov 1040x Going concern value. Www irs gov 1040x   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Www irs gov 1040x It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Www irs gov 1040x It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Www irs gov 1040x Workforce in place, etc. Www irs gov 1040x   This includes the composition of a workforce (for example, its experience, education, or training). Www irs gov 1040x It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Www irs gov 1040x   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Www irs gov 1040x Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Www irs gov 1040x Business books and records, etc. Www irs gov 1040x   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Www irs gov 1040x It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Www irs gov 1040x Patents, copyrights, etc. Www irs gov 1040x   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Www irs gov 1040x Customer-based intangible. Www irs gov 1040x   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Www irs gov 1040x For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Www irs gov 1040x A customer base. Www irs gov 1040x A circulation base. Www irs gov 1040x An undeveloped market or market growth. Www irs gov 1040x Insurance in force. Www irs gov 1040x A mortgage servicing contract. Www irs gov 1040x An investment management contract. Www irs gov 1040x Any other relationship with customers involving the future provision of goods or services. Www irs gov 1040x   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Www irs gov 1040x Supplier-based intangible. Www irs gov 1040x   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Www irs gov 1040x The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Www irs gov 1040x Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Www irs gov 1040x Also, see Assets That Are Not Section 197 Intangibles below. Www irs gov 1040x Government-granted license, permit, etc. Www irs gov 1040x   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Www irs gov 1040x For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Www irs gov 1040x Covenant not to compete. Www irs gov 1040x   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Www irs gov 1040x An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Www irs gov 1040x   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Www irs gov 1040x Franchise, trademark, or trade name. Www irs gov 1040x   A franchise, trademark, or trade name is a section 197 intangible. Www irs gov 1040x You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Www irs gov 1040x For information on currently deductible contingent payments, see chapter 11. Www irs gov 1040x Professional sports franchise. Www irs gov 1040x   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Www irs gov 1040x Contract for the use of, or a term interest in, a section 197 intangible. Www irs gov 1040x   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Www irs gov 1040x It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Www irs gov 1040x Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Www irs gov 1040x Any interest in a corporation, partnership, trust, or estate. Www irs gov 1040x Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Www irs gov 1040x Any interest in land. Www irs gov 1040x Most computer software. Www irs gov 1040x (See Computer software , later. Www irs gov 1040x ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Www irs gov 1040x An interest in a film, sound recording, video tape, book, or similar property. Www irs gov 1040x A right to receive tangible property or services under a contract or from a governmental agency. Www irs gov 1040x An interest in a patent or copyright. Www irs gov 1040x Certain rights that have a fixed duration or amount. Www irs gov 1040x (See Rights of fixed duration or amount , later. Www irs gov 1040x ) An interest under either of the following. Www irs gov 1040x An existing lease or sublease of tangible property. Www irs gov 1040x A debt that was in existence when the interest was acquired. Www irs gov 1040x A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Www irs gov 1040x Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Www irs gov 1040x Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Www irs gov 1040x You generally must use the straight line method over its useful life. Www irs gov 1040x For certain intangibles, the depreciation period is specified in the law and regulations. Www irs gov 1040x For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Www irs gov 1040x For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Www irs gov 1040x Computer software. Www irs gov 1040x   Section 197 intangibles do not include the following types of computer software. Www irs gov 1040x Software that meets all the following requirements. Www irs gov 1040x It is, or has been, readily available for purchase by the general public. Www irs gov 1040x It is subject to a nonexclusive license. Www irs gov 1040x It has not been substantially modified. Www irs gov 1040x This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Www irs gov 1040x Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Www irs gov 1040x Computer software defined. Www irs gov 1040x   Computer software includes all programs designed to cause a computer to perform a desired function. Www irs gov 1040x It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Www irs gov 1040x Rights of fixed duration or amount. Www irs gov 1040x   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Www irs gov 1040x However, this does not apply to the following intangibles. Www irs gov 1040x Goodwill. Www irs gov 1040x Going concern value. Www irs gov 1040x A covenant not to compete. Www irs gov 1040x A franchise, trademark, or trade name. Www irs gov 1040x A customer-related information base, customer-based intangible, or similar item. Www irs gov 1040x Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Www irs gov 1040x You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Www irs gov 1040x If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Www irs gov 1040x Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Www irs gov 1040x Amortize these costs using the rules of Revenue Procedure 2004-36. Www irs gov 1040x For more information, see Revenue Procedure 2004-36, 2004-24 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 1063, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2004-24_IRB/ar16. Www irs gov 1040x html. Www irs gov 1040x A change in the treatment of creative property costs is a change in method of accounting. Www irs gov 1040x Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Www irs gov 1040x These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Www irs gov 1040x Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Www irs gov 1040x You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Www irs gov 1040x You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Www irs gov 1040x You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Www irs gov 1040x This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Www irs gov 1040x See Related person , later, for more information. Www irs gov 1040x Exceptions. Www irs gov 1040x   The anti-churning rules do not apply in the following situations. Www irs gov 1040x You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Www irs gov 1040x The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Www irs gov 1040x This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Www irs gov 1040x The gain-recognition exception, discussed later, applies. Www irs gov 1040x Related person. Www irs gov 1040x   For purposes of the anti-churning rules, the following are related persons. Www irs gov 1040x An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Www irs gov 1040x ), and lineal descendants (children, grandchildren, etc. Www irs gov 1040x ). Www irs gov 1040x A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Www irs gov 1040x Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Www irs gov 1040x (For an exception, see section 1. Www irs gov 1040x 197-2(h)(6)(iv) of the regulations. Www irs gov 1040x ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Www irs gov 1040x The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Www irs gov 1040x The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Www irs gov 1040x The executor and beneficiary of an estate. Www irs gov 1040x A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Www irs gov 1040x A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Www irs gov 1040x Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Www irs gov 1040x Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Www irs gov 1040x A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Www irs gov 1040x Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Www irs gov 1040x When to determine relationship. Www irs gov 1040x   Persons are treated as related if the relationship existed at the following time. Www irs gov 1040x In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Www irs gov 1040x In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Www irs gov 1040x Ownership of stock. Www irs gov 1040x   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Www irs gov 1040x Rule 1. Www irs gov 1040x   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Www irs gov 1040x Rule 2. Www irs gov 1040x   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Www irs gov 1040x Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Www irs gov 1040x Rule 3. Www irs gov 1040x   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Www irs gov 1040x Rule 4. Www irs gov 1040x   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Www irs gov 1040x Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Www irs gov 1040x Gain-recognition exception. Www irs gov 1040x   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Www irs gov 1040x That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Www irs gov 1040x That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Www irs gov 1040x See chapter 2 in Publication 544 for information on making this choice. Www irs gov 1040x   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Www irs gov 1040x Notification. Www irs gov 1040x   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Www irs gov 1040x Anti-abuse rule. Www irs gov 1040x   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Www irs gov 1040x To avoid the requirement that the intangible be acquired after August 10, 1993. Www irs gov 1040x To avoid any of the anti-churning rules. Www irs gov 1040x More information. Www irs gov 1040x   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Www irs gov 1040x 197-2(h). Www irs gov 1040x Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Www irs gov 1040x See Amended Return , next. Www irs gov 1040x If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Www irs gov 1040x See Changing Your Accounting Method , later. Www irs gov 1040x Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Www irs gov 1040x A mathematical error made in any year. Www irs gov 1040x A posting error made in any year. Www irs gov 1040x An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Www irs gov 1040x When to file. Www irs gov 1040x   If an amended return is allowed, you must file it by the later of the following dates. Www irs gov 1040x 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Www irs gov 1040x (A return filed early is considered filed on the due date. Www irs gov 1040x ) 2 years from the time you paid your tax for that year. Www irs gov 1040x Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Www irs gov 1040x File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Www irs gov 1040x The following are examples of a change in method of accounting for amortization. Www irs gov 1040x A change in the amortization method, period of recovery, or convention of an amortizable asset. Www irs gov 1040x A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Www irs gov 1040x A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Www irs gov 1040x Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Www irs gov 1040x An adjustment in the useful life of an amortizable asset. Www irs gov 1040x Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Www irs gov 1040x Any change in the placed-in-service date of an amortizable asset. Www irs gov 1040x See Regulations section 1. Www irs gov 1040x 446-1(e)(2)(ii)(a) for more information and examples. Www irs gov 1040x Automatic approval. Www irs gov 1040x   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Www irs gov 1040x For a list of automatic accounting method changes, see the Instructions for Form 3115. Www irs gov 1040x Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Www irs gov 1040x For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Www irs gov 1040x See Revenue Procedure 2006-12, 2006-3 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 310, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2006-03_IRB/ar14. Www irs gov 1040x html. Www irs gov 1040x  See Revenue Procedure 2006-37, 2006-38 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 499, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2006-38_IRB/ar10. Www irs gov 1040x html. Www irs gov 1040x  See Revenue Procedure 2008-52, 2008-36 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 587, available at www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2008-36_IRB/ar09. Www irs gov 1040x html. Www irs gov 1040x  See Revenue Procedure 2009-39, 2009-38 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 371, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2009-38_IRB/ar08. Www irs gov 1040x html. Www irs gov 1040x  See Revenue Procedure 2011-14, 2011-4 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 330, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2011-04_IRB/ar08. Www irs gov 1040x html. Www irs gov 1040x  See Revenue Procedure 2011-22, 2011-18 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 737, available at  www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2011-18_IRB/ar08. Www irs gov 1040x html. Www irs gov 1040x Also, see Revenue Procedure 2012-39, 2012-41 I. Www irs gov 1040x R. Www irs gov 1040x B. Www irs gov 1040x 470 available at www. Www irs gov 1040x irs. Www irs gov 1040x gov/irb/2012-41_IRB/index. Www irs gov 1040x html. Www irs gov 1040x Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Www irs gov 1040x If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Www irs gov 1040x If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Www irs gov 1040x Any remaining gain, or any loss, is a section 1231 gain or loss. Www irs gov 1040x If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Www irs gov 1040x For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Www irs gov 1040x Nondeductible loss. Www irs gov 1040x   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Www irs gov 1040x Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Www irs gov 1040x Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Www irs gov 1040x The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Www irs gov 1040x The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Www irs gov 1040x Covenant not to compete. Www irs gov 1040x   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Www irs gov 1040x Nonrecognition transfers. Www irs gov 1040x   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Www irs gov 1040x You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Www irs gov 1040x Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Www irs gov 1040x   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Www irs gov 1040x Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Www irs gov 1040x Example. Www irs gov 1040x You own a section 197 intangible you have amortized for 4 full years. Www irs gov 1040x It has a remaining unamortized basis of $30,000. Www irs gov 1040x You exchange the asset plus $10,000 for a like-kind section 197 intangible. Www irs gov 1040x The nonrecognition provisions of like-kind exchanges apply. Www irs gov 1040x You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Www irs gov 1040x You amortize the other $10,000 of adjusted basis over a new 15-year period. Www irs gov 1040x For more information, see Regulations section 1. Www irs gov 1040x 197-2(g). Www irs gov 1040x Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Www irs gov 1040x See Reforestation Costs in chapter 7. Www irs gov 1040x You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Www irs gov 1040x There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Www irs gov 1040x The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Www irs gov 1040x A partner, shareholder, or beneficiary cannot make that election. Www irs gov 1040x A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Www irs gov 1040x , of a partnership or S corporation. Www irs gov 1040x The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Www irs gov 1040x Qualifying costs. Www irs gov 1040x   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Www irs gov 1040x Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Www irs gov 1040x They include costs for the following items. Www irs gov 1040x Site preparation. Www irs gov 1040x Seeds or seedlings. Www irs gov 1040x Labor. Www irs gov 1040x Tools. Www irs gov 1040x Depreciation on equipment used in planting and seeding. Www irs gov 1040x Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Www irs gov 1040x Qualified timber property. Www irs gov 1040x   Qualified timber property is property that contains trees in significant commercial quantities. Www irs gov 1040x It can be a woodlot or other site that you own or lease. Www irs gov 1040x The property qualifies only if it meets all of the following requirements. Www irs gov 1040x It is located in the United States. Www irs gov 1040x It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Www irs gov 1040x It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Www irs gov 1040x Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Www irs gov 1040x Amortization period. Www irs gov 1040x   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Www irs gov 1040x You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Www irs gov 1040x Life tenant and remainderman. Www irs gov 1040x   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Www irs gov 1040x Any remainder interest in the property is ignored for amortization purposes. Www irs gov 1040x Recapture. Www irs gov 1040x   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Www irs gov 1040x See chapter 3 of Publication 544 for more information. Www irs gov 1040x How to make the election. Www irs gov 1040x   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Www irs gov 1040x A description of the costs and the dates you incurred them. Www irs gov 1040x A description of the type of timber being grown and the purpose for which it is grown. Www irs gov 1040x Attach a separate statement for each property for which you amortize reforestation costs. Www irs gov 1040x   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Www irs gov 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www irs gov 1040x Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Www irs gov 1040x 9100-2” on Form 4562. Www irs gov 1040x File the amended return at the same address you filed the original return. Www irs gov 1040x Revoking the election. Www irs gov 1040x   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Www irs gov 1040x Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Www irs gov 1040x Please provide your daytime telephone number (optional), in case we need to contact you. Www irs gov 1040x You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Www irs gov 1040x    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Www irs gov 1040x NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Www irs gov 1040x These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Www irs gov 1040x For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Www irs gov 1040x If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Www irs gov 1040x Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Www irs gov 1040x However, see Atmospheric pollution control facilities for an exception. Www irs gov 1040x The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Www irs gov 1040x Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Www irs gov 1040x You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Www irs gov 1040x See chapter 3 of Publication 946. Www irs gov 1040x A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Www irs gov 1040x The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Www irs gov 1040x The facility must be certified by state and federal certifying authorities. Www irs gov 1040x The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Www irs gov 1040x Also, it must not significantly change the nature of the manufacturing or production process or facility. Www irs gov 1040x The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Www irs gov 1040x The federal certifying authority will describe the nature of the potential cost recovery. Www irs gov 1040x You must then reduce the amortizable basis of the facility by this potential recovery. Www irs gov 1040x New identifiable treatment facility. Www irs gov 1040x   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Www irs gov 1040x It does not include a building and its structural components unless the building is exclusively a treatment facility. Www irs gov 1040x Atmospheric pollution control facilities. Www irs gov 1040x   Certain atmospheric pollution control facilities can be amortized over 84 months. Www irs gov 1040x To qualify, the following must apply. Www irs gov 1040x The facility must be acquired and placed in service after April 11, 2005. Www irs gov 1040x If acquired, the original use must begin with you after April 11, 2005. Www irs gov 1040x The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Www irs gov 1040x If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Www irs gov 1040x Basis reduction for corporations. Www irs gov 1040x   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Www irs gov 1040x More information. Www irs gov 1040x   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Www irs gov 1040x Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Www irs gov 1040x If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Www irs gov 1040x The amortization period begins the month you first receive an economic benefit from the costs. Www irs gov 1040x For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Www irs gov 1040x Optional write-off method. Www irs gov 1040x   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Www irs gov 1040x For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Www irs gov 1040x Costs you can amortize. Www irs gov 1040x   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Www irs gov 1040x You paid or incurred the costs in your trade or business. Www irs gov 1040x You are not deducting the costs currently. Www irs gov 1040x How to make the election. Www irs gov 1040x   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Www irs gov 1040x Generally, you must file the return by the due date (including extensions). Www irs gov 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www irs gov 1040x Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Www irs gov 1040x 9100-2” on Form 4562. Www irs gov 1040x File the amended return at the same address you filed the original return. Www irs gov 1040x   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Www irs gov 1040x Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Www irs gov 1040x If you make this election, there is no AMT adjustment. Www irs gov 1040x The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Www irs gov 1040x How to make the election. Www irs gov 1040x   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Www irs gov 1040x   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Www irs gov 1040x However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Www irs gov 1040x Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Www irs gov 1040x 9100-2” on Form 4562. Www irs gov 1040x File the amended return at the same address you filed the original return. Www irs gov 1040x Revoking the election. Www irs gov 1040x   You must obtain consent from the IRS to revoke your election. Www irs gov 1040x Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Www irs gov 1040x The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Www irs gov 1040x If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Www irs gov 1040x Prev  Up  Next   Home   More Online Publications